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Photo = Yonhap news |
[Alpha Biz= Paul Lee] The international credit rating agency Standard & Poor's (S&P) on Tuesday maintained South Korea's sovereign credit rating at 'AA', with a stable outlook.
S&P has kept South Korea's rating at 'AA' since upgrading it from 'AA-' to 'AA' in August 2016.
S&P expects South Korea's economy to slow down slightly over the next 3-5 years, but it will maintain a higher average growth rate compared to most high-income countries. The government deficit is also projected to remain at an appropriate level for the next 3-4 years.
S&P forecasts that South Korea's GDP growth rate will slow to 1.2% this year due to worsening international trade conditions but will recover to 2.0% in the following year. By 2028, South Korea's economic growth is expected to trend at around 2% annually, with GDP per capita surpassing $41,000 by that year.
Furthermore, S&P emphasized that South Korea's institutional and policy environment is a crucial factor supporting its sovereign credit. Although there was some loss of trust in political stability due to the unexpected imposition of martial law, the swift repeal of the decree and effective responses mitigated the negative impact.
S&P also stated that the social and economic stability was not significantly disrupted, as the legal regulations and procedures were appropriately followed until the presidential election schedule was determined. It assessed that political uncertainties did not have a serious impact on the economic and financial systems due to the proactive policy responses from government agencies.
However, S&P noted that if the recent political divisions continue, it could weaken the policy implementation capacity of the next government.
Regarding the contingent liabilities of domestic financial institutions, S&P assessed them as being at a limited level. However, it pointed out that the growing debts of non-financial public enterprises in recent years pose a constraint on fiscal operations.
Finally, S&P highlighted the uncertain and substantial costs associated with reunification in the event of the collapse of the North Korean regime, which it considers to be the most significant vulnerability factor for South Korea's credit rating.
AlphaBIZ Paul Lee(hoondork1977@alphabiz.co.kr)
